Human resources accounting


One important development arising out of the recognition of crucial importance of personnel in organizations, is the Human Resources Accounting. During the early 1960s behavioral scientists attacked conventional accounting practice for its failure to value the human resources of an organization along with its money and material resources. The potential and promise of human resources accounting have been thus recognized by the accountants. Human Resources are identified as the values of the production capacity of a firm’s human organization, and the value of its customer’s goodwill. Eric Flanholtz defines human resources accounting as, “accounting for people as organizational resource. Human resources accounting is measurement of the cost and value of people for organizations.� It is clear from this definition that the human resources accounting is useful for both general managers and personnel managers since human resources information influences the planning and controlling functions of the management and various operative functions of personnel management . It helps the management to utilize human resources most economically and efficiently. It also helps the managers in making sound decisions in personnel matters by providing required information . Thus, it is a very useful control technique.

Human Resource and Market Economy

The three important areas of human resources are skill, ability, and knowledge. Knowledge plays most vital role in the modern industry as rail road played its role during the 19th century business and as assembly line played its role during the 20th Century. According to P.F . Durcker ,� knowledge is the only meaningful resource today� All other resources flow freely across borders.

Knowledge and Competitive Advantage

Modern business has been undergoing changes at a fast rate due to changes in technology, liberalization of economies etc. The changes in the business resulted in severe competition. The business should have knowledgeable employees to have competitive advantage over the competitors. In the words of Thaygarajan, Managing Director, Glaxo, “organizations that have world class ambitious will need to nurture knowledge workers.� As Adi B. Godrej, Chief Executive Officer, Godrej soaps puts it, “all corporate strengths are dependent on people�.

Products and Human Resources
Many companies compete based on the strength of their products. These companies have to use people as the source spring for wining concepts. In fact, product improvements are generated by people, creative and innovative products and services can be developed and modified only through intensive and planned human efforts. A successful product is developed by using knowledge as a core competence of the company.

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